United Fire Group announces completion of debt offering
United Fire Group (UFG) (NASDAQ: UFCS), a property and casualty insurance holding company, announced the completion of a $70 million senior unsecured notes placement. The 9.0% notes, due May 31, 2039, were issued in a private offering led by Ares Management Credit funds. The proceeds will support UFG's anticipated growth and general corporate purposes. UFG President and CEO Kevin Leidwinger expressed satisfaction with the capital raise, emphasizing its alignment with the company's long-term growth strategies. Stonybrook Capital served as UFG's exclusive financial advisor for the offering.
Jeff Hughes from Ares Credit Group highlighted the investment's fit within their focus on creative and flexible private credit solutions. The Ares Alternative Credit strategy, managing approximately $36.5 billion in assets, focuses on various asset-based credit investments.
- Successful completion of $70 million senior unsecured notes placement
- 9.0% notes due May 31, 2039, providing long-term financing
- Proceeds to support anticipated growth and general corporate purposes
- Strong support from Ares Management Credit funds as lead investor
- Positive feedback from UFG President and CEO on capital raise execution
- Stonybrook Capital served as exclusive financial advisor, indicating strong advisory support
- High interest rate of 9.0% on the issued notes could increase financial burden
- Dependence on private offering, indicating potential limitations in accessing public markets
- The notes are unsecured, potentially increasing financial risk for UFG
- The investment is confined to qualified institutional buyers, limiting market liquidity
Insights
The issuance of $70 million in senior unsecured notes at a 9.0% interest rate due in 2039 is significant for United Fire Group (UFG). This long-term debt placement is aimed at supporting growth and general corporate purposes. From a financial perspective, the relatively high interest rate reflects current market conditions and possibly UFG’s credit rating or market sentiment about its debt.
Proceeds utilization is important to monitor, as the effective deployment can substantially influence UFG’s future profitability and growth. If the funds are used effectively to capture growth opportunities and enhance operational efficiencies, the debt servicing cost could be offset by increased revenues and profits. However, if the deployment does not yield expected returns, the high-interest debt could strain UFG’s financials.
It's also noteworthy that this transaction was conducted privately, which often allows for more tailored terms versus public offerings. The involvement of Ares Management Credit funds as lead investor, known for their expertise in alternative credit, provides additional credibility and support for the strategic rationale behind the offering.
Retail investors should keep a close eye on how UFG plans to use the proceeds and subsequent updates on their growth initiatives.
For a property and casualty insurance company like UFG, raising capital through debt can be both an opportunity and a challenge. The industry is highly regulated and the use of debt proceeds must be carefully managed to meet regulatory requirements and ensure financial stability. The insurance industry often uses debt financing to buffer against underwriting losses, invest in technology, or expand their market reach through acquisitions or new product offerings.
Given UFG’s stated intention to support anticipated growth and general corporate purposes, it’s likely they are looking to either expand their underwriting capacity or invest in initiatives that could improve their competitive positioning. However, the impact on their combined ratio (a measure of underwriting profitability) and overall profitability remains to be seen. The combined ratio is critical for insurance companies; a ratio under 100% indicates underwriting profit, while above 100% indicates a loss. Investors should look for improvements in this metric as a sign that the debt is being used effectively.
From a strategic perspective, partnering with a reputable financial advisor like Stonybrook Capital adds a layer of confidence that the funds will be managed prudently and in alignment with UFG’s long-term growth objectives.
CEDAR RAPIDS, Iowa, June 03, 2024 (GLOBE NEWSWIRE) -- United Fire Group, Inc (the “Company” or “UFG”) (NASDAQ: UFCS), a property and casualty insurance holding company, today announced that it has successfully completed a placement of
“We are pleased with the successful execution of this capital raise,” said UFG President and CEO Kevin Leidwinger. “We appreciate the investment community’s support of our long-term strategies intended to deliver sustainable profitable growth.”
Stonybrook Capital, LLC served as the Company’s exclusive financial advisor in connection with the Offering.
“We are pleased to provide a long-term private capital solution in support of UFG’s growth initiatives,” said Jeff Hughes, Managing Director in the Ares Credit Group. “This investment fits squarely within the Ares Alternative Credit team’s focus on delivering creative and flexible private credit solutions and represents our continued focus to partner with the insurance industry.”
The Ares Alternative Credit strategy is one of the largest investors in asset-based credit managing approximately
The notes were offered and sold in a transaction exempt from the registration requirements of the U.S. Securities Act of 1933, as amended (the "Securities Act"), and in the United States only to persons reasonably believed to be "qualified institutional buyers" in reliance on the exemption from registration under the Securities Act provided by Rule 144A and outside the United States to certain non U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act.
This press release shall not constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state.
About UFG
Founded in 1946 as United Fire & Casualty Company, UFG, through its insurance company subsidiaries, is engaged in the business of writing property and casualty insurance.
Through our subsidiaries, we are licensed as a property and casualty insurer in 50 states, plus the District of Columbia, and we are represented by approximately 1,000 independent agencies. A.M. Best Company assigns a rating of "A-" (Excellent) for members of the United Fire & Casualty Group. For more information about UFG, visit www.ufginsurance.com.
Contact:
Investor Relations
Email: ir@unitedfiregroup.com
Media Inquiries
Email: news@unitedfiregroup.com
Disclosure of Forward-Looking Statements
This release may contain forward-looking statements about our operations, anticipated performance and other similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor under the Securities Act of 1933 and the Securities Exchange Act of 1934 for forward-looking statements. The forward-looking statements are not historical facts and involve risks and uncertainties that could cause actual results to differ from those expected and/or projected. Such forward-looking statements are based on current expectations, estimates, forecasts and projections about the Company, the industry in which we operate, and beliefs and assumptions made by management. Words such as "expect(s)," "anticipate(s)," "intend(s)," "plan(s)," "believe(s)," "continue(s)," "seek(s)," "estimate(s)," "goal(s)," "remain(s) optimistic," "target(s)," "forecast(s)," "project(s)," "predict(s)," "should," "could," "may," "will," "might," "hope," "can" and other words and terms of similar meaning or expression in connection with a discussion of future operations, financial performance or financial condition, are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed in such forward-looking statements. Information concerning factors that could cause actual outcomes and results to differ materially from those expressed in the forward-looking statements is contained in Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission ("SEC") on February 29, 2024. The risks identified in our Annual Report on Form 10-K and in our other SEC filings are representative of the risks, uncertainties, and assumptions that could cause actual outcomes and results to differ materially from what is expressed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release or as of the date they are made. Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
FAQ
What is the significance of United Fire Group's $70 million notes issuance?
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Who led the investment for United Fire Group's recent note placement?
For what purposes will United Fire Group use the proceeds from the notes offering?
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